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Even profitable small businesses can experience seasonal fluctuations and shortfalls in cash and resources. That’s where a short term business loan can come in handy. A short term loan offers a quick boost of financial support. And now, with the growing popularity of alternative lenders, there are more options than ever to get the capital you need to keep growing.

What is a short term business loan?

With a short term business loan, businesses borrow a set amount of money upfront and pay it back, with interest, at regular intervals. As the name suggests, payment terms are shorter than long term loans and usually range from 3 to 18 months. For instance, the majority of Sail’s loans are repaid over six months.

The main difference between a short term loan and its longer counterpart is that a short term loan can be either secured or unsecured. There are pros and cons to both options. You’ll benefit from lower interest rates with a secured loan, but will not have to put up any collateral with an unsecured loan.

Short-term funding provides a quick, flexible way to get the money your business needs. Applications can be completed in just a few minutes and approved instantly, with funding in your bank account in as few as 24 hours. Plus, with online or alternative lenders, you will enjoy an easier application process that fits in with your cyclical working capital needs.

How much can I borrow for a short term business loan?

The answer to this question depends heavily on whether you’re applying for a secured or unsecured loan. With an unsecured short term loan, you may be able to borrow anywhere from $5,000 to 250,000 while a larger amount is likely possible with a secured loan.

There are two ways a lender might calculate the interest on your loan. Some might use a fixed interest rate while others use a factor rate. Factor rates usually vary from 1.1 to 1.5 and depend on the length of time you’ve been in business, your industry, average monthly sales and more.

Your loan might also depend on your repayment schedule. Some lenders may offer a weekly or monthly repayment while others take repayments out daily. If you’re not sure how much you can borrow, you can try our free loan calculator to review your options.

6 reasons why businesses may want a short term business loan

There are many reasons why a business would choose to apply for a short term loan, depending on their financial position, growth plans and the market opportunity.

Here are a few common scenarios in which a short term loan might be useful:

  1. You’re a seasonal business steering through the quiet months or preparing for the busy season
  2. You’re a high-volume, small dollar sales business and want to better manage cash flow
  3. You’re looking to innovate or invest in new technology or equipment
  4. Your business is growing and you need to hire additional staff
  5. Your credit score is not high enough for a traditional bank loan
  6. You have an earnings history but not enough to qualify for a traditional loan

How does a short term business loan work?

  • Check if you qualify
    Some lenders require that businesses be operating for a certain length of time or generate a minimum profit.
  • Apply online
    This is the fastest way to get approved and can be done in just a few minutes.
  • Get approved
    Lenders can now approve your loan in less than 24 hours, helping you to obtain fast business finance.
  • Receive your funds
    It’s time to start growing your business.

Paperwork Checklist for a Short Term Business Loan

Make sure you understand what information is required of you to apply. Preparing the necessary paperwork in advance of applying will help streamline the application process.You may be asked to provide the following:

Information detailing the type of business you operate, annual turnove, length of time the company has been in business
Loan amount and purpose
Credit history
Other requirements, depending on the lender

4 expert tips to know about short term business loans

  1. Check what’s required
    Lenders will assess your application based on your business risk level and will want to know things like your profitability, time in operation and industry
  2. Make sure the repayment schedule works for you
    Some lenders require daily repayments, so compare your options in advance
  3. Ask about other charges and fees
    Lenders might not always be upfront about hidden fees.
  4. Ask if you can repay early without penalty
    Some lenders charge a fee or penalty if you want to repay your loan early.

Why choose sail for your short term business loan?

Did you know Sail is one of the only direct lenders that allows you to repay your short term business loan early with no fees or penalty? Although we offer repayment periods between 3-12 months, the majority of our loans occur over 6 months, allowing small businesses to quickly access the capital they deserve to continue thriving.

Our short term loan application process can be done online within just minutes, plus once approved, you can expect to receive your funds the following business day.

Still not sure if a business line of credit is right for you? Compare other types of loans to learn more.

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